CONTENTS REPORT OF THE DIRECTORS OF THE MANAGEMENT COMPANY...3 REPORT OF THE FUND MANAGER...6 KEY FINANCIAL DATA...7

Transcription

1 CONTENTS FUND S INFORMATION MISSION STATEMENT... 2 REPORT OF THE DIRECTORS OF THE MANAGEMENT COMPANY REPORT OF THE FUND MANAGER....6 KEY FINANCIAL DATA...7 REPORT OF THE TRUSTEE TO THE UNIT HOLDERS... 8 STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE...9 REVIEW REPORT TO THE UNIT HOLDERS...11 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS...12 STATEMENT OF ASSETS AND LIABILITIES INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME DISTRIBUTION STATEMENT CASH FLOW STATEMENT STATEMENT OF MOVEMENT IN UNIT HOLDER S FUND NOTES TO THE FINANCIAL STATEMENTS SUPPLEMENTARY NON FINANCIAL INFORMATION AS REQUIRED UNDER SECTION 6 (D), (F), (G), (I) AND (J) OF THE FIFTH SCHEDULE TO THE NBFC REGULATIONS PATTERN OF UNIT HOLDING AS PER REQUIREMENTS OF CODE OF CORPORATE GOVERNANCE

2 FUND S INFORMATION Management Company BMA Asset Management Company Limited 801 Unitower. I.I. Chundrigar Road, Karachi74000 Board of Directors of the Management Company Mr. Waqar Hassan Siddique Chairman Mr. Muddassar Malik Chief Executive Mr. Abdullah Shahin Director Mr. Omar Syed Director Mr. Thomas James Speechley Director Mr. Tashfin I. Huq Director Mr. Zahid Qasim Noorani Director Mr. Muhammad Iqbal Director CFO and Company Secretary of the Management Company Mr. Faisal Ali Khan Audit Committee of the Management Company Mr. Muhammad Iqbal Chairman Mr. Tashfin I. Huq Mr. Zahid Qasim Noorani Human Resource and Remuneration Committee Mr. Tashfin I. Huq Chairman Mr. Muhammad Iqbal Mr. Muddassar Malik Trustee MCB Financial Services Limited Trustee Office 3 rd Floor Adamjee House I.I. Chundrigar Road Karachi Bankers Standard Chartered Bank (Pakistan) Limited Bank AlHabib Limited Faysal Bank Limited MCB Bank Limited Bank Alfalah Limited Allied Bank Limited Distributors BMA Financial Services Limited Auditors Ernst & Young Ford Rhodes Sidat Hyder & Co. Chartered Accountants Progressive Plaza, Beaumont Road, Karachi Legal Adviser KMS Law Associates 207, Beaumont Plaza behind PIDC House, Karachi Registrar Technology Trade (Pvt.) Limited Dagia House, 241C, Block 2, PECHS Karachi Fund Stability Rating AA+ (f) Management Quality Rating Rating under process 1

3 MISSION STATEMENT The BMA Empress Cash Fund aims to minimize risk, maximize liquidity and generate a competitive rate of return with Portfolio allocation concentrated in AA rated banks and short duration sovereign rated securities, which will enable the fund to earn consistent risk adjusted returns and beat its benchmark (three month deposit rate offered by AA rated banks) while maintaining adequate liquidity and supreme credit quality. VISION STATEMENT BMA Asset Management seeks to establish itself as a leader within the asset management industry of Pakistan by following the principles of prudent investment practice and keeping our fiduciary responsibility towards our investors as the core belief to our investment philosophy. 2

4 REPORT OF THE DIRECTORS OF THE MANAGEMENT COMPANY The Board of Directors of BMA Asset Management Company Limited, the Management Company to BMA Empress Cash Fund (BECF) is pleased to present its report and financial statements of the Fund for the year ended June 30, PROFILE The BMA Empress Cash Fund is a professionally managed cash fund, which aims to minimize risk, maximize liquidity and generate a competitive rate of return. Portfolio allocation will be concentrated in AA rated banks and short duration sovereign rated securities, which will enable the fund to earn consistent risk adjusted returns. The Fund was launched on 12 November 2009 and aims to consistently beat its benchmark (3M deposit rate offered by AA rated banks) while maintaining adequate liquidity and superior credit quality. FUND S FINANCIAL PERFORMANCE For the year ended June 30, 2012 the Fund earned Rs mn from income on investments, bank balances and term deposits. In addition the fund booked element of income from the issue and redemption of units which totalled Rs mn. Total income thus came to Rs mn. Expenses for the year totalled Rs mn and consisted of Rs mn remuneration to the trustee of the fund, Rs mn fee to the SECP and Rs mn remuneration to the management company. As a result net income for the year was Rs mn. Financial highlights June 30, 2012 Mark up/interest income 89,629,198 Element of income (1,493,704) Total Income 87,836,897 Expenses 12,198,897 Net Income 75,638,000 Net Asset Value per unit () As of 30 June the net assets of the Fund were Rs mn, of which 6.18% was held as cash, 15.91% was invested in money market placements with AA/AA+ rated financial institutions and 77.37% was allocated to sovereign rated Treasury Bills. The portfolio duration as of 30 June was 28 days, which is in line with the Fund s investment strategy of staying on the shorter end of the yield curve in an unstable macroeconomic environment. 3

5 Asset Allocation [ ] Cash 6.2% Govt. paper 77.4% Placements 15.9% Accruals 0.5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% RETURN & FUND UPDATE During fiscal year 2012 the fund generated a net return of 11.32% for investors. This was against the benchmark average of 8.23% during the year. The Fund continued to declare dividends on a regular basis and announced a cumulative distribution of Rs. 1.09/unit for FY12 which was equal to 10.84% of the opening NAV. Since the company s decision to reduce the management fee to 0.75% per annum of net assets in December 2011, BECF has been amongst the top performing money market funds and has outperformed the industry average by a considerable margin. MACROECONOMIC OUTLOOK Fiscal year 2013 started off on a more optimistic note with inflation dropping to single digits in July (9.6%) and August (9.0%). More importantly the economy received a much needed boost from the receipt of $1.1 bn in outstanding Coalition Support Fund dues. With investment as a percentage of GDP dropping to just 12.0% the SBP deemed it appropriate to cut the discount rate by 150 bps to 10.5% in its 10 th August 2012 monetary policy review. This was against our view in the last report in which we expected that space for further easing would be limited and that monetary tightening would occur in 2HCY12.The market is confident of further cuts and the possibility of a single digit policy rate cannot be ruled out as the SBP brings real interest rates down in light of lower inflation data. While there has been positive news in the short term we fear that macroeconomic headwinds will intensify from 2HFY13 onwards. FX reserves will remain under pressure as Pakistan has to make debt repayments of almost $4.0 bn during the current fiscal year. No material improvement in the trade deficit can be expected as oil prices have rebounded 25% from their June lows while commodity prices for food items (wheat, soybeans, corn etc.) are at all time highs. With FDI flows on a consistent decline, Pakistan will remain critically dependent on USD inflows from CSF, Kerry Lugar, 3G auction and Etisilat. The non materialization of these inflows will erode the ability of the country to finance even a small current account deficit. The decline in FX reserves will put pressure on USD:PKR parity and we project a year end level of PKR depreciation will exacerbate domestic inflation which we expect to return to double digits by December To mitigate the effects of a problematic balance of payments position we will most probably see a return to the IMF in Given the fiscal profligacy, resulting monetary overhang and rebounding inflation we do not expect the current monetary easing cycle to last past FY13. 4

6 STRATEGY In light of the above macroeconomic scenario, BECF s strategy is likely to focus on the following; Increase duration with the intention of trading in order to take advantage of falling yields Realize gains at the bottom of the interest rate cycle which we expect to occur during 1QCY13 Allocate at least 50% of the portfolio to Treasury Bills Limit AA exposures to 30% of net assets to maintain credit quality of portfolio AA+ 7% AA 15% Credit Quality [ ] Govt. Securities 78% Acknowledgement The Board is thankful to its valued investors, the Securities and Exchange Commission of Pakistan, the Trustees of the Fund, MCB Financial Services Limited and the Registrar, Technology Trade (Pvt) Limited. The Directors of the Management Company also acknowledge the efforts put in by the team of the Management Company for the meticulous management of the Fund. For and on behalf of the Board Karachi September 13, 2012 Muddassar Malik Chief Executive Officer 5

7 REPORT OF THE FUND MANAGER BMA EMPRESS CASH FUND June 12 NAV Fund Returns BECF BM Fund Objective Annualized Return (Jun12) 10.47% 8.09% The BMA Empress Cash Fund is a professionally managed cash fund, which aims to minimize risk, maximize Annualized Return (FY12) 11.32% 8.23% liquidity and generate a competitive rate of return. This will be achieved by concentrating portfolio allocation in AA rated banks and short duration sovereign rated securities. Portfolio Characteristics Fund Commentary Assets in PKR MLN ( ) NAV/unit in PKR ( ) Portfolio Duration 28 days Portfolio Standard Deviation 0.01% Asset Allocation Jun May Cash 6.18% 5.74% monetary tightening. Placements 15.91% 16.95% Market Outlook T Bills 77.37% 76.60% Accruals 0.54% 0.72% Leverage None None Fund Details Fund Type Category Open End Money Market Fund During June the Fund declared a dividend of Rs. 0.16/unit thus bringing the total payout for FY12 to Rs. 1.09/unit. Annualized return for Jun12 was 10.47% while return for FY12 was 11.32%. AUMs stood at Rs mn, a decrease of 1.4% over May. Portfolio duration decreased slightly to 28 days against 30 days in May. Standard deviation of returns was 0.01%, reflecting the low risk and stable nature of the fund's income. Allocation towards placements decreased to 15.91%, exposure to T bills increased from 76.6% in May to 77.37% in June while cash holdings were adequate at 6.18%. The Fund will continue to remain on the shorter end of the yield curve as the current macroeconomic equilibrium has tilted the balance towards Inflation for Jun12 moderated to 11.26% as single digit food inflation and drop in transportation costs resulted in a below consensus figure. As a result inflation for FY12 was well within the target range at 11.02%. Unfortunately lower inflation was more a result of supply side factors as government borrowing from the SBP continued to climb and now stands at Rs bn. FX reserves dropped to $14.96 bn as debt payments to the IMF continued and the current account registered a deficit of $414 mn during May12. Though pressure on the PKR is expected to remain, recent news flow on the release of $2.5 bn pending CSF payments could provide significant relief to the macroeconomic environment and ease pressure on public finances, currency and inter bank liquidity. Benchmark* 3M Bank Rate Portfolio Ratings Profile Month Return Benchmark Inception Date 12 Nov 09 June % 8.09% Dealing Days Monday Friday AA, 15.2% May % 8.07% Cut off time 4:00 PM April % 8.60% Pricing Mechanism Forward AA+, March % 9.33% Management Fee 0.75% 7.04% February % 9.00% Front end Load Upto 1% January % 7.44% Back end Load Nil December % 8.93% Fund Stability Rating AA+(JCR) November % 8.00% Risk Profile Low Risk October % 7.10% Listing KSE AAA, September % 8.00% Trustee MCBFSL 77.8% August % 7.33% Auditor Ford Rhodes July % 8.83% Transfer Agent Technology Trade Monthly return (on annualized basis) Legal Advisors KMS Law Associates 14% Investment Committee BECF Return Benchmark Muddassar M. Malik Chief Executive Officer 12% Farrukh Hussain Chief Investment Officer 10% Mustafa O. Pasha Fund Manager 8% Bilal Khan Member 6% Ali Najeeb Risk Manager Hassan Bin Nasir Secretary 4% SMS your name and to 2620 info@bmafunds.com 2% 0% Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 MUFAP Recommended Format Disclosure: The Fund has not made provisions amounting to Rs. 4,534,619 against Workers' Welfare Fund liability, if the same were made on 30 June 2012 the NAV per unit/fy12 return of the Fund would be lower by Rs /5.66%. For details investors are advised to read note 11 of the fund's latest financial statements. Disclaimer: This publication is for informational purposes only and nothing herein should be construed as a solicitation, recommendation or an offer to buy or sell any Fund. All investments in mutual funds are subject to market risks. The NAV based prices of units and any dividends/returns thereon are dependant on forces and factors affecting the capital markets. These may go up or down based on market conditions. Past performance is not necessarily indicative of future results. 6

8 KEY FINANCIAL DATA PERFORMANCE TABLE Net Assets 785,550, ,992, ,875,409 Net asset value per unit Distributions per unit Selling price for units Repurchase price for units Highest Offer price per unit Lowest Offer price per unit Highest Redemption price unit Lowest Redemption price unit Annual return (%) Weighted average portfolio duration 28 days 70 days 80 days * The Fund was launched on November 12, Disclaimer Past performance is not necessarily indicative of future performance and that unit prices and investment returns may go down, as well as up. 7

9 REPORT OF THE TRUSTEE TO THE UNIT HOLDERS Report of the Trustee Pursuant to Regulation 41(h) of the NonBanking Finance Companies and Notified Entities Regulations, 2008 BMA Empress Cash Fund, an openend Scheme established under a Trust Deed dated June 18, 2009 executed between BMA Asset Management Company Limited, as the Management Company and MCB Financial Services Limited, as the Trustee. The Fund offered its units for public subscription Scheme from November 10, 2009 to November 11, BMA Asset Management Company Limited, the Management Company of BMA Empress Cash Fund, has in all material respects, managed BMA Empress Cash Fund during the year ended June 30, 2012 in accordance with the provisions of the following: (i) (ii) (iii) (iv) the limitations imposed on the Asset Management Company and the Trustee under the trust deed and other applicable laws; the valuation or pricing is carried out in accordance with the deed and any regulatory requirement; the creation and cancellation of units are carried out in accordance with the deed; and any regulatory requirement For the purpose of information, the attention of unit holders is drawn towards audit report and note 16 to the financial statements which explain contingency in respect of the Fund s contribution to the Worker s Welfare Fund (WWF) aggregating to Rs. 4.5 million for which no provision has been made in the financial statements. In this regard, the Management Company of the Fund expects that the constitutional petition pending in the Honorable High Court of Sindh on the subject will be decided favorably. Karachi: September 4, 2012 Khawaja Anwar Hussain Chief Executive Officer MCB Financial Services Limited 8

10 STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE FOR THE YEAR ENDED 30 JUNE 2012 This statement is being presented by the Board of Directors of BMA Asset Management Company Limited, the Management Company of BMA Empress Cash Fund to comply with the Code of Corporate Governance contained in Regulation No.35, Chapter XI of listing regulations of Karachi Stock Exchange for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Management Company has applied the principles contained in the Code in the following manner: 1. The Management Company encourages representation of independent nonexecutive directors and directors representing minority interests on its Board of Directors. At present, the Board includes; Category Independent Directors Executive Directors NonExecutive Directors Names Muhammad Iqbal Tashfin I Huq Zahid Qasim Noorani Muddassar Mazhar Malik Waqar Hassan Siddique Thomas James Speechley Abdullah Shahin Omer Syed The independent directors meets the criteria of independence under clause i (b) of the Code. 2. The directors have confirmed that none of them is serving as a director on more than seven listed companies (including this Fund). 3. All the resident directors of the Management Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or NBFI or, being a member of a stock exchange, have been declared as a defaulter by that stock exchange No casual vacancy occurred on the Board during the year ended June 30, The Management Company has prepared a Code of Conduct and has ensured that appropriate steps have been taken to disseminate it throughout the Company along with its supporting policies and procedures. 6. The Board has developed a vision / mission statement, overall corporate strategy and significant policies of the Fund. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive Officer, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meeting. The minutes of the meetings were appropriately recorded and circulated. 9. The Directors are conversant of the relevant laws applicable to the Management Company, its policies and procedures and provisions of memorandum and articles of association and are aware of their duties and responsibilities. 9

11 10. The Board has approved the appointment of CFO, Company Secretary and M/s Yousuf Adil Saleem & Co. Chartered Accountants (Delloite) as internal auditors, including their remuneration and terms and conditions of employment, as determined by Chief Executive Officer. 11. The Directors Report of the Fund for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 12. The directors, CEO and executives of the Management Company do not hold any interest in the units of the Fund other than that disclosed in the pattern of unit holding. 13. The Chief Executive Officer and CFO duly endorsed the financial statements of the Fund before approval of the Board. 14. The Management Company has complied with all the significant corporate and financial reporting requirements of the Code relevant to the Fund. 15. The Board has formed an Audit Committee comprising of three members all of whom are nonexecutive directors and the chairman of the committee is an independent director. 16. The meetings of the Audit Committee were held in every quarter prior to approval of interim and final results of the Fund as required by the Code. The Terms of Reference of the Committee have been formed and advised to the committee for compliance. 17. The board has formed a HR and Remuneration Committee comprising of three members, two of whom are nonexecutive members and the chairman of the committee is an independent director. 18. The Management Company has outsourced the internal audit function to M/s Yousuf Adil Saleem & Co. Chartered Accountants (Delloite) who are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company. 19. The statutory auditors of the Fund have confirmed that they have been given a satisfactory rating under Quality Control Review program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold units of the Fund and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard The closed period prior to the announcement of interim/final results which may materially affect the market price of the Fund s units, was determined and intimated to directors, employees and stock exchange. We confirm that all other material principles contained in the Code have been complied with. For and on behalf of the Board of Directors Karachi: September 13, 2012 Muddassar Malik Chief Executive Officer 10

12 REVIEW REPORT TO THE UNIT HOLDERS ON THE STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE OF CORPORATE GOVERNANCE We have reviewed the Statement of Compliance with the best practices (the Statement) contained in the Code of Corporate Governance (the Code) prepared by the Board of Directors of BMA Asset Management Company Limited (the Management Company) of BMA Empress Cash Fund (the Fund) to comply with the Listing Regulation No. 35 (Chapter XI) of the Karachi Stock Exchange where the Fund is listed. The responsibility for compliance with the Code is that of the Board of Directors of the Management Company of the Fund. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement reflects the status of the Management Company s compliance with the provisions of the Code in respect of the Fund and report if it does not. A review is limited primarily to inquiries of the Management Company s personnel and review of various documents prepared by the Management Company to comply with the Code. As part of our audit of financial statements, we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board s statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Management Company s corporate governance procedures and risks. Further, SubRegulation (xiii a) of Listing Regulation 35 notified by The Karachi Stock Exchange vide circular KSE/N 269 dated 19 January 2009 requires the Management Company to place before the Board of Directors for their consideration and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm s length transactions and transactions which are not executed at arm s length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the audit committee. We have not carried out any procedure to determine whether the related party transactions were undertaken at arm s length price or not. Based on our review, nothing has come to our attention which causes us to believe that the Statement does not appropriately reflect the Management Company s compliance, in all material respects, with the best practices contained in the Code in respect of the Fund for the year ended 30 June Ernst & Young Ford Rhodes Sidat Hyder & Co. CHARTERED ACCOUNTANTS Karachi: September 13, 2012 Omer Chughtai 11

13 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of BMA Empress Cash Fund (the Fund), which comprise the statement of assets and liabilities as at 30 June 2012, and the related statements of income, comprehensive income, distribution, cash flows and movement in unit holders fund for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s responsibility for the financial statements The Management Company of the Fund is responsible for the preparation and fair presentation of these financial statements in accordance with the requirements of the Trust Deed, the NonBanking Finance Companies (Establishment and Regulation) Rules, 2003 (the NBFC Rules), the NonBanking Finance Companies and Notified Entities Regulations 2008 (the NBFC Regulations) and approved accounting standards as applicable in Pakistan. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards as applicable in Pakistan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the state of the Fund s affairs as at 30 June 2012 and of its financial performance, cash flows and transactions for the year then ended in accordance with approved accounting standards as applicable in Pakistan. Emphasis of matter We draw attention to note 16 to the accompanying financial statements which explains the contingency in respect of the Fund s contribution to Workers Welfare Fund aggregating to Rs. 4.5 million for which no provision has been made in these financial statements. In this regard, the Management Company of the Fund expects that the constitutional petition pending in the Honorable High Court of Sindh on the subject will be decided favorably. Our opinion is not qualified in respect of this matter. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In our opinion, the financial statements have been prepared in accordance with the relevant provisions of Trust Deed, NBFC Rules and NBFC Regulations, Karachi: September 13, 2012 Ernst & Young Ford Rhodes Sidat Hyder & Co. CHARTERED ACCOUNTANTS Omer Chughtai 12

14 STATEMENT OF ASSETS AND LIABILITIES AS AT 30 JUNE 2012 Note June 30, 2012 June 30, 2011 ASSETS Bank balances 8 46,290, ,323,581 Investments 9 740,018, ,988,768 Markup / interest receivable 10 2,441, ,562 Preliminary expenses and floatation costs 11 1,429,033 2,035,089 Prepayments and other receivables 52,544 43,120 TOTAL ASSETS 790,231, ,013,120 LIABILITIES Remuneration payable to management company , ,197 Remuneration payable to trustee , ,093 Annual fee payable to Securities and Exchange Commission of Pakistan , ,125 Payable to unit holders against redemption of units 55,000 Payable to cash opted unit holders against dividend 867,862 Accrued expenses and other liabilities 15 2,590,031 3,069,556 TOTAL LIABILITIES 4,681,300 5,020,971 CONTINGENCY 16 NET ASSETS 785,550, ,992,149 Unit holders funds (as per statement attached) 785,550, ,992,149 Number of units in issue 17 78,080,867 64,053,688 Net Asset Value per unit The annexed notes from 1 to 26 form an integral part of these financial statements. For BMA Asset Management Company Limited (Management Company) Muddassar Malik Chief Executive Officer Tashfin I. Huq Director 13

15 INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2012 Note June 30, 2012 June 30, 2011 INCOME Mark up / interest income 18 89,629, ,967,616 Loss on sale of investments net (152,741) (602,030) Unrealized loss on investments at fair value through profit or loss (145,856) (459,449) Element of (loss) / income and capital (loss) / gain included in prices of units issued less those in units redeemed net (1,493,704) (21,714,114) Other Income 67,500 TOTAL INCOME 87,836, ,259,523 EXPENSES Remuneration of the management company ,661,097 16,422,488 Sales tax on management fee ,225,822 Remuneration of the trustee 13 1,256,962 1,554,048 Annual fee to SECP , ,125 Brokerage expense 115, ,425 Amortisation of preliminary expenses and floatation costs 606, ,400 Auditors remuneration , ,433 Listing fee 30,082 30,000 Mutual fund rating fee 195, ,337 Printing and stationary 98,812 83,159 Bank charges 33,771 41,728 TOTAL EXPENSES 12,198,897 20,524,143 NET INCOME 75,638,000 95,735,380 EARNINGS PER UNIT 20 The annexed notes from 1 to 26 form an integral part of these financial statements. For BMA Asset Management Company Limited (Management Company) Muddassar Malik Chief Executive Officer Tashfin I. Huq Director 14

16 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2012 June 30, 2012 June 30, 2011 Net income for the year 75,638,000 95,735,380 Other comprehensive income for the year Total comprehensive income for the year 75,638,000 95,735,380 The annexed notes from 1 to 26 form an integral part of these financial statements. For BMA Asset Management Company Limited (Management Company) Muddassar Malik Chief Executive Officer Tashfin I. Huq Director 15

17 DISTRIBUTION STATEMENT FOR THE YEAR ENDED 30 JUNE 2012 June 30, 2012 June 30, 2011 Undistributed income brought forward {includes unrealized loss of Rs. 459,449 (01 July 2010: unrealized loss: Rs. 370,146) realized loss of Rs. 797,226 (01 July 2010: realized loss: Rs. 195,196)} 35,452,863 51,076,765 Net income for the year 75,638,000 95,735,380 Final distribution at the rate of Rs. 0.6 per unit for the year ended 30 June 2010 approved on 07 July 2010 First interim distribution for the rate of Rs. 0.4 per unit approved on 07 January 2011 Second interim distribution at the rate of Rs. 0.2 per unit approved on 05 April 2011 (47,387,920) (46,932,981) (17,038,381) Final distribution at the rate of Rs. 0.5 per unit for the year ended 30 June 2011 approved on 07 July 2011 (32,026,844) First interim distribution at the rate of Rs per unit approved on 05 October 2011 (October 2010: Nil) (16,686,592) Second interim distribution at the rate of Rs per unit approved on 29 December 2011 (December 2010: Nil) (18,123,220) Third interim distribution at the rate of Rs per unit approved on 29 March 2012 (March 2011: Nil) (13,050,034) Fourth interim distribution at the rate of Rs. 0.1 per unit approved on 27 April 2012 (April 2011:Nil) (8,013,615) Fifth interim distribution at the rate of Rs per unit approved on 30 May 2012 (May 2011:Nil) (6,249,302) Final distribution at the rate of Rs per unit for the year ended 30 June 2012 approved on 28 June 2012 (12,201,976) Undistributed income carried forward {includes unrealised loss of Rs. 145,856 (30 June 2011: unrealised loss of Rs. 459,449 ) realised loss of Rs. 949,967 (30 June 2011: realized loss of Rs. 797,226) 4,739,280 35,452,863 The annexed notes from 1 to 26 form an integral part of these financial statements. For BMA Asset Management Company Limited (Management Company) Muddassar Malik Chief Executive Officer Tashfin I. Huq Director 16

18 CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2012 CASH FLOWS FROM OPERATING ACTIVITIES Net income for the year 75,638,000 95,735,380 Adjustments for: Mark up / interest income (89,629,198)8 (138,967,616) Loss on sale of investments net 152, ,030 Unrealized loss on investments at fair value through profit or loss 145, ,449 Element of loss / (income) and capital loss / (gain) included in prices of units issued less those in units redeemed net 1,493,704 21,714,114 Amortisation of preliminary expenses and floatation costs 606, ,400 (87,230,841) (115,587,623) (Increase) / decrease in assets Proceed from sale of securities 5,572,392,340 11,379,227,018 Markup / interest income received 21,389, ,723,591 Purchase of securities (5,728,299,762) (11,283,549,321) Prepayments and other receivables (9,424) 14,052 (134,526,906) 238,415,340 Increase / (decrease) in liabilities Remuneration payable to management company (389,620) (285,347) Remuneration payable to trustee 2,087 (15,410) Annual fee payable to Securities & Exchange Commission of Pakistan (285,475) 494,434 Payable to unit holders against redemption of units (55,000) (6,143,892) Payable to cash opted unit holders against dividend 867,862 Accrued expenses and other liabilities (479,525) (667,116) (339,671) (6,617,331) Net cash (used) in / generated from operating activities (146,459,418) 211,945,766 CASH FLOWS FROM FINANCING ACTIVITIES Receipts from issue of units 1,205,873,696 1,688,159,490 Payments for redemption of units (1,173,447,256) (1,970,492,244) Net cash inflow / (outflow) from financing activities 32,426,440 (282,332,754) Net decrease in cash and cash equivalents (114,032,978) (70,386,988) Cash and cash equivalents at beginning of the year 160,323, ,710,569 Cash and cash equivalent at end of the year 46,290, ,323,581 The annexed notes from 1 to 26 form an integral part of these financial statements. For BMA Asset Management Company Limited (Management Company) Muddassar Malik Chief Executive Officer Tashfin I. Huq Director 17

19 STATEMENT OF MOVEMENT IN UNIT HOLDER'S FUNDS FOR THE YEAR ENDED 30 JUNE 2012 June 30, 2012 June 30, 2011 Net assets at the beginning of the year 675,992, ,875,409 { Rs per unit (2011: Rs per unit)} Cash received on issuance of units* 1,205,873,696 1,688,159,490 Cash paid / payable on redemption of units** (1,173,447,256) (1,970,492,244) 708,418, ,542,655 Element of loss / (income) and capital loss / (gain) included in prices of units issued less those in units redeemed net 1,493,704 21,714,114 Net income for the year 75,638,000 95,735,380 Other comprehensive income for the year Total comprehensive income for the year 75,638,000 95,735,380 Net assets at the end of the year 785,550, ,992,149 [Rs per unit (2011: Rs )] Number of units Number of units * Number of units issued including 10,544,751 bonus units (2011: 10,988,256) 128,728, ,385,235 ** Number of units redeemed 114,701, ,311,414 The annexed notes from 1 to 26 form an integral part of these financial statements. For BMA Asset Management Company Limited (Management Company) Muddassar Malik Chief Executive Officer Tashfin I. Huq Director 18

20 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE LEGAL STATUS AND NATURE OF BUSINESS 1.1 BMA Empress Cash Fund (the Fund) was established in Pakistan under a Trust Deed executed between BMA Asset Management Company Limited, as the Management Company and MCB Financial Services Limited, as the Trustee. The Trust deed was executed and approved by Securities and Exchange Commission of Pakistan (SECP) in accordance with the NonBanking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules) on June 18, The management company of the Fund has been licensed to act as an asset management company under the NBFC Rules by the SECP. The registered office of the management company is situated at 801 Unitower, I.I. Chundrigar Road, Karachi. 1.3 The Fund is an openended money market mutual fund listed on the Karachi Stock Exchange. Units are offered for public subscription on a continuous basis. Units are transferable and can be redeemed by surrendering them to the Fund except for the units issued to core investors which are not redeemable for a period of two years from the date of issue. 1.4 The Fund is structured to provide a competitive level of income that commensurate with enhanced liquidity and credit profile through investment primarily in short term deposits and money market instruments with an overall rupeeweighted average maturity of not more than 90 days. 1.5 Title to the assets of the Fund is held in the name of MCB Financial Services Limited as a trustee of the Fund. 2. STATEMENT OF COMPLIANCE 2.1 These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Ordinance, 1984, the requirements of the Trust Deed, the NBFC Rules, the NonBanking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations) and directives issued by the SECP. Wherever the requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or the directives issued by the SECP differ with the requirements of IFRS, the requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or the requirements of the said directives prevail. 3. BASIS OF MEASUREMENT 3.1 These financial statements have been prepared under the historical cost convention, except for investments and derivatives which are accounted for as stated in These financial statements have been presented in Pakistan which is the functional and presentation currency of the Fund. 19

21 4. CHANGES IN ACCOUNTING POLICY AND DISCLOSURES 4.1 Investments The accounting policies adopted in the preparation of these financial statements are consistent with those of the previous financial year except as described below; The Fund has adopted the following new and amended IFRS and IFRIC interpretations which became effective during the year; IFRS 7 Financial Instruments: Disclosures (Amendment) IAS 24 Related Party Disclosures (Revised) IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment) In May 2010, International Accounting Standards Board (IASB) issued amendments to various standards primarily with a view to removing inconsistencies and clarifying wording. These improvements are listed below; IFRS 7 Financial Instruments: Disclosures Clarification of disclosures IAS 1 Presentation of Financial Statements Clarification of statement of changes in equity IAS 34 Interim Financial Reporting Significant events and transactions IFRIC 13 Customer Loyalty Programmes Fair value of award credits The adoption of the above standards, amendments, interpretations and improvements did not have any material effect on the financial statements. 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 5.1 Investments The investments of the Fund, upon initial recognition, are classified as investment at fair value through profit and loss, held to maturity investment or available for sale investment, as appropriate. All investments are initially measured at fair value plus, in the case of investments not at fair value through profit or loss, transaction costs that are directly attributable to acquisition. All regular way purchases and sales of investments are recognised on the trade date i.e. the date the Fund commits to purchase / sell the investment. Regular way purchases and sales of investments require delivery of securities within the time frame generally established by regulation or market convention. The investments are classified in the following categories: Investments at fair value through profit or loss This category has two sub categories, namely; financial instruments held for trading, and those designated at fair value through profit or loss upon initial recognition. Investments which are acquired principally for the purpose of generating profit from short term fluctuation in price or are part of the portfolio in which there is recent actual pattern of short term profit taking are classified as held for trading. All derivatives are classified as heldfortrading. These are initially recorded at cost. Derivatives with positive fair values (unrealized gains) are included in assets and derivates with negative fair values (unrealized losses) are included in liabilities in the statement of assets and liabilities. Investments designated at fair value through profit or loss upon initial recognition include those group of financial assets which are managed and their performance evaluated on a fair value basis in accordance with the documented risk management/ investment strategy. After initial measurement, investment designated at fair value through profit or loss are carried at fair value and the gains or losses on revaluation are recognized in the income statement. 20

22 Held to maturity Investment with fixed maturities and fixed or determinable payments are classified as held to maturity investments when management has both the intent and ability to hold to maturity. After initial measurement, such investments are carried at amortised cost less any provision for impairment. Available for sale Investments which are not classified in the above categories are classified as available for sale investments. After initial measurement, such investments are measured at fair value with unrealised gains or losses recognised directly in the statement of comprehensive income until the investment is derecognised or determined to be impaired, at which time the cumulative gain or loss previously recognised in statement of comprehensive income is taken to the income statement. Fair value of investments is determined as follows: Government Securities Fair value of government securities is determined by reference to the quotations obtained from the PKRV rate sheet on the Reuters page. 5.2 Provisioning policy To fulfill the requirement of SECP Circular No. 13 dated 04 May 2009 the Board of Directors (BOD) approved a comprehensive provisioning policy whereby the Investment Committee (IC) can make accelerated provision against nonperforming security after considering the financial difficulties of the issuer, probability of the borrower entering bankruptcy or financial reorganization, deterioration of key financial ratios, down grade of credit rating, measurable decrease in cash flows and industry outlook. The policy states: An asset shall be classified as nonperforming, if the interest and/or principal amount have not been received or remained outstanding for one quarter or as specified by the SECP from time to time from the day such income / installment has fallen due. Whilst the above definition shall remain applicable in all general conditions, the conditions applicable for classification of deep discount bonds as non performing asset shall be put into practice for investment in all other assets also when the BOD of the Asset Management Company on the recommendation of the IC deems it appropriate and in the best interest of its investors. An asset is reclassified as 'standard/performing asset' only when both overdue interest and overdue installments are paid in full and there is satisfactory performance for a subsequent period of 6 months. The complete policy is placed on the company's website for purposes of disclosure and transparency. 5.3 Preliminary expenses and flotation costs Preliminary expenses and floatation costs represent expenditures incurred for the incorporation of the Fund and are being amortised over a period of five years. 5.4 Issue and redemption of units Units issued are recorded at the offer price, determined by the management company, for the applications received by it. The offer price represents the net asset value per unit as of the close of the business day plus provision of duties and charges and provision of transaction costs and allowable sales load. The sales load is payable to the distribution company as processing fee. Units redeemed are recorded at the redemption price, applicable to units for which the distributors receive redemption applications during business hours of that day. The redemption price represents the net asset value per unit as of the close of the business day less duties, taxes, charges on redemption and provision for transaction costs, if applicable. 21

23 Redemption of units is recorded on acceptance of application of redemption. 5.5 Element of income / (loss) and capital gain / (loss) included in prices of units sold less those in units redeemed An equalisation account called the 'element of income / (loss) and capital gain / (losses) included in prices of units sold less those in units repurchased' is created, in order to prevent the dilution of per unit income and distribution of income already paid out on redemption. The Fund records the net element of accrued income / (loss) relating to units issued and redeemed during an accounting period in the income statement while the portion of the element of income / (loss) that relates to unrealised gains / (losses) relating to available for sale investment securities held by the Fund is recorded in a separate reserve account in the statement of assets and liabilities and any amount remaining in this reserve account at the end of an accounting period (whether gain or loss) is included in the amount available for distribution to the unit holders. 5.6 Net asset value per unit The net asset value per unit disclosed in the statement of assets and liabilities is calculated by dividing the net assets of the Fund by the number of units in issue at the yearend. Net assets are defined in clause 66 of the NBFC regulations Revenue recognition Gains / (losses) arising on sale of investments are included in the income statement on the date at which the transaction takes place. Dividend income is recognised when the right to receive the dividend is established. Income on certificates of investment, placements, bank deposits, commercial papers and federal government securities are recognised at rate of return implicit in the instrument on a time proportionate basis. 5.8 Cash and cash equivalents Cash and cash equivalents comprise of bank balances and short term deposits. 5.9 Taxation The Fund is exempt from taxation on income under clause 99 of Part I to the Second Schedule of the Income Tax Ordinance, 2001, subject to the condition that not less than 90 percent of its accounting income excluding realised and unrealised capital gain for the year is distributed amongst the unit holders. The Fund intends to avail this exemption for current and future periods. Accordingly, no provision is made for current and deferred taxation in these financial statements Financial instruments All the financial assets and financial liabilities are recognised at the time when the Fund becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to receive cash flows related to the asset expire. Financial liabilities are derecognised when they are extinguished, that is, when the obligation specified in the contract is discharged, cancelled, or expires. Any gain or loss on derecognition of the financial assets and financial liabilities is taken to the income statement in the period in which it arises Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are only offset and net amount reported in the statement of assets and liabilities when there is a legally enforceable right to set off the recognised amount and the Fund intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously Impairment The carrying amount of the assets is reviewed at each balance sheet date to determine whether 22

24 there is any indication of impairment of any asset or a group of assets. If any such indication exists, the recoverable amount of such assets is estimated and impairment losses are recognised immediately in the financial statements Provision A provision is recognised in the statement of assets and liabilities when the Fund has a legal or constructive obligation as a result of past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation Distribution to unit holders Distribution to unit holders is recognised upon declaration and approval by the BOD of the management company. 6. ACCOUNTING ESTIMATES AND JUDGMENTS The preparation of financial statements requires management to make judgments, estimates and assumptions that effect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making judgments about carrying values of assets and liabilities. The estimates and underlying assumptions are reviewed on an ongoing basis. Judgments made by management in the application of accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment are explained in the relevant accounting policies / notes in the financial statements. 7. ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE The following revised standards and interpretations with respect to approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standards or interpretations. Standard, Interpretation or Amendment 23 Effective date (accounting periods beginning on or after) IFRS 7 Financial Instruments : Disclosures (Amendments) 01 January 2013 Amendments enhancing disclosures about offsetting of financial assets and financial liabilities IAS 1 Presentation of Financial Statements Presentation of items of comprehensive income 01 July 2012 IAS 12 Income Taxes (Amendment) Recovery of Underlying Assets 01 January 2012 IAS 19 Employee Benefits (Amendment) 01 January 2013 IAS 32 Offsetting Financial Assets and Financial liabilities (Amendment) 01 January 2014 IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 01 January 2013 The Fund expects that the adoption of the above revisions, amendments and interpretations of the standards will not affect the Fund s financial statements in the period of initial application. In addition to the above, the following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose of applicability in Pakistan. Standard IASB Effective date (annual periods beginning on or after) IFRS 9 Financial Instruments: Classification and Measurement 01 January 2015 IFRS 10 Consolidated Financial Statements 01 January 2013 IFRS 11 Joint Arrangements 01 January 2013